Memo to Business Analysts: A Compelling Treatise on Why and How Businesses should Automate Decisions December 12, 2007

You may know that fellow blogger James Taylor is the author, with Neil Raden, of a new book on the current hot topic of Automated Decision Making, titled Smart Enough Systems.In it they present a compelling proposition to business intelligence analysts and executives:

Look out for decisions that can be automated in your business;

Automate them and the business will be much better for it.

I suggest that you bring this work to the attention of the more creative managers and professionals in your business.

I have written on decision automation, in particular how to identify candidate decisions, a while back, here and here. You may care to revisit these, Dear Reader.

James and Neil propose that it is practicable to identify decisions that can be automated, and that the subsequent system design path is now both well trodden and amply supplied with technical support.They then give lots of detail on how to do it.

After reading the book, I put a set of questions to James, and here are his responses.I believe you’ll find them interesting.

Q1. On page 1 in the Introduction you say the book comprises two unequal “halves”, the first being general and the second technical.Are you implying that executive readers should read the first “half”, Chapters 1-4, and then move to the implementation proposals in Chapter 9?

A1. I sometimes feel like we had two books, one for executives of any kind and one for technology focused people, which we had to put inside one set of covers! The introduction did try and guide people to read as you suggest, but it’s hard in a physical book to do that well. In general I do think this would be a good approach for a non-technical reader except that I would also encourage them to read chapter 8 “Readiness Assessment” and at least skim the stories in the other chapters.

Q2. Much of the book refers to “automating hidden operational decisions” or “micro-decision automation”.Does the EDM approach described in the book only apply to automated decisions, or is it also relevant to partially automated decisions or even to a decision support role for human decision makers?

A2. I recently came across the work of Herbert Simon again and found his classification of problems very helpful:

Clearly EDM works particularly well as an approach to handle structured problems, whether you want to automate them completely or automate a large part of the decision while leaving some room for human intervention and participation in the decision making process. I think EDM also has value for the semi-structured problems, especially in areas like checking for completeness or eligibility. At some level EDM solutions blur into decision support solutions but an EDM solution is always going to deliver actions or potential actions not just information.

Q2(a). Does this reply imply that EDM is principally a decision support process or tool – relevant when a problem situation is identified or predictable in detail.Hence, alternative BI systems, applications or techniques are required to help executives, professionals and automation systems understand current business status and to find problem situations that require a response (to use a Herbert Simon term); presumably a response determined using EDM principles?

A2(a). Absolutely. I don’t like calling EDM decision support, though, because I find people have a mental model of decision support that can confuse them when thinking about EDM. A problem needs to be relatively well defined and understood to be amenable to automation using EDM. While many of these problems come from process-centric analysis, it is very often the case that more ad-hoc analytics are used to find the problems that offer the best pay off and to see how well an EDM solution is working once it is implemented. In particular the adaptive control aspect of EDM solutions requires good performance monitoring and analytics tools.

Q3. Similarly, the reference in Chapter 5 to Analytics and Predictive Modeling, and in Chapter 7 to Optimization and Operations Research, could imply that EDM has a role in higher level decision support, especially at tactical level.Is this a correct inference?

A3. I don’t think so. I think it is more true that some of the techniques and technologies that work for higher level decision support are also useful in the development of EDM solutions. The mindset though, that of automating decisions not simply helping someone who has to make the decision, is quite different. The different solution type also means the techniques are often applied in quite different ways – producing an equation rather than a picture for example.

Q3(a). Following my earlier theme, and looking ahead to your answer to Question 8:is there a role for EDM in automating the finding and diagnosis of problem situations in the business, perhaps without actually producing the “equation” that will solve it – leaving that part to a human?

A3(a). This is one of the edge conditions for EDM, where the system takes the action of diagnosing something (rather than fixing it) and is certainly not uncommon. It is often found where the delivery of the action cannot easily be automated. Interestingly, it has been found to be more effective to allow the human to provide inputs that rely on human skills, such as entering the mood of a customer, and having the system produce an answer than having the system provide options or diagnosis and then having the human interpret that.

Q4. IT groups worldwide are committing to SOA as a major part of their strategic plan implementation.You refer to SOA many times in the book, and how EDM and Decision Services are complementary to the concept.To what extent is the implementation of EDM and micro-decision automation generally dependent upon the enterprise having implemented SOA principles?

A4. I don’t think it is dependent but it is certainly true that companies already adopting SOA will find it much easier to adopt EDM. I also think that companies adopting SOA are more ready both for the explicit identification of a new class of solution (a decision service) and more open to adopting new technology to develop such services. I would not be at all surprised if the vast majority of EDM projects were not done alongside or following on from SOA initiatives.

Q5. Some years ago there was much discussion about Organizational Learning, the Learning Organization, Designing Learning Systems, etc.Is your approach to Adaptive Control in Chapter 7 related to this, or does it have different underlying purpose and concepts?

A5. To some extent. Part of the value of adaptive control is that it means an organization is committed to constantly challenging its “best” approach to see if it can come up with a better one – either because it knows more or because the environment has changed. In that sense the adaptive control mindset matches that of a learning organization. I also think that the use of business rules as a core technology has to do with the learning organization in that it gives a way for those who understand the business to actively participate in “coding” how the systems that support that business work.

Q6. The champion/challenger process described in Chapter 7 is depictedas two or three dimensional in the diagrams.Is it more difficult to implement when there are several alternative control variables? Are there project selection and management criteria that will help ensure champion/challenger successful approaches?

A6. It is much easier to implement adaptive control and champion/challenger when there are clear and well defined metrics with which to measure the relative value of different approaches. If the value of an approach is a complex mix of factors then it will be harder to compare two and pick the “winner”. Without a champion/challenger approach, of course, you are even worse off as you don’t even know how those alternatives might have performed.

Q7. You have clearly and comprehensively outlined the case for automating micro-decisions in Chapters 1 to 3.This argument ought to be compelling for many executives.However, there are many options for implementing rule based, model based and adaptive control based systems using the technologies in later chapters.Is it practicable to describe other implementation procedures introduced in Chapters 8 and 9, possibly via the book’s Wiki?

A7. One of the big challenges when writing the book was that many of the component technologies and approaches have value in other contexts besides that of decision management. Rules and analytics can both, for instance, improve a business process management project. There are so many of these that I don’t think even the book’s wiki would be able to handle it. We are engaged in some interesting research around decision patterns and a decision pattern language. I think this is an interesting area – identifying and describing the implementation patterns for decisions where decision management makes sense.

Q8. It appears from your discussion in Chapter 9 that the key to successfully implementing EDM in a “Greenfield” site is the selection of the initial projects.You propose selecting two applications; one rule based, and then a second that is predictive model based.This sounds sensible, but are there alternative project selection methods that might be applied?Other examples could include:

Partial automation of more complex, but valuable, decisions; e.g. using rules or models to find problem situations without solving them in Phase 1, with later phases implementing the automation fully?

Analyzing the informal “know-how” knowledge base of key professionals to determine if an initial project can be built by capturing and encoding their knowledge?

Use industry best practice reports to identify enterprise deficiencies that may be rectified using EDM?

A8. Chapter 9 was hard to write because different customers have succeeded in different ways. The way we outline was the one that seemed like the most likely to work overall. Each individual company may find that a different approach works better for them. Companies reluctant to fully automate decisions, for instance, may well find the first of your examples to be very useful in getting them more comfortable with the idea of automation. Identifying problem areas using best practice and driving to fix those would also be very effective, though it might well be implemented using a first rules project and a first analytic project as we suggest.

In general I don’t think that starting with know-how and working out is a good approach, however. Our experience is that you need to have the decision identified and “grab it by the throat” to successfully adopt EDM. Decision first. Always.